Fed Rate Cuts Spur Market Declines: Market Focus

Global markets dropped amid Fed rate cuts and economic uncertainty. Asian stocks, commodities, and U.S. indices declined as recession fears grew.

Global stock markets and commodities took a sharp downturn on Thursday as investors reacted to the U.S. Federal Reserve’s latest monetary policy decisions, sparking concerns over future economic growth and uncertainty. The Fed’s third consecutive rate cut and announcement of fewer rate cuts expected in 2025 have left markets jittery and led to widespread declines in Asian and Western markets.

Asian Markets Experience Widespread Losses

In Asia-Pacific, stock markets saw substantial losses, reflecting the cautious sentiment spreading across the region. Japan’s Nikkei 225 fell 0.7%, while the Shanghai Composite and Hang Seng dropped by 0.31% and 0.74%, respectively. The Australian S&P/ASX 200 saw a sharp decline, falling by 1.78%.

The Bank of Japan, which had held its interest rates steady at 0.25%, added to the market anxiety as the yen weakened significantly against the dollar. Following the announcement, the yen dropped to 155.40, down from 154.60. In South Korea, the Kospi and Kosdaq indices both saw declines of 1.65%, with the won nearing its weakest level since 2009 at 1,450.46 per dollar.

The Monetary Authority in Hong Kong cut interest rates by 25 basis points in response to the Fed’s actions, as it tightly pegs the Hong Kong dollar to the U.S. dollar. Meanwhile, China’s CSI 300 slid 0.62%, increasing concerns over the global economy’s health.

Commodities Sink Amid Economic Woes

The retreat in global equities also affected commodities, with gold falling by 1.24% to $2,621.35 per ounce and silver dropping 2.38% to $29.84. Brent Crude oil traded at $72.90, down 0.56%, while WTI oil suffered a steeper loss, falling 1.39% to $69.40.

The pullback in commodities signals growing fears of weaker demand as global economic growth slows, especially following recent news of a technical recession in New Zealand, which saw its GDP fall 1% in the third quarter of 2024.

Fed Rate Cuts Spur Market Declines: Market Focus

U.S. Markets Continue Their Decline

Overnight, U.S. markets continued their downward trend. The Dow Jones lost 1,123.03 points, or 2.58%, closing at 42,326.87 — marking its first 10-day losing streak since 1974. Similarly, the S&P 500 fell 2.95%, while the Nasdaq Composite dropped 3.56%. The sell-off came after the Federal Reserve implemented a 25-basis-point rate cut, bringing the target range to 4.25%-4.5%. The central bank also indicated that it now expects just two rate cuts in 2025, a revision from the four rate cuts previously projected.

Many had anticipated the Fed’s policy shift, which has raised concerns about the economy’s long-term recovery. The central bank’s caution in its future rate cut projections and sluggish economic data suggest that growth may continue to face headwinds.

Economic Data and Recessionary Fears

In other economic news, November’s U.S. building permits came in at 1.51 million, surpassing the expected 1.43 million, indicating some strength in the housing market. However, overall market sentiment remains weighed down by fears of stagflation and the uncertain pace of recovery.

New Zealand’s economy officially entered recession, with a 1% decline in GDP for the September quarter, marking two consecutive quarters of economic contraction. This has heightened concerns that other economies may soon follow suit, contributing to global market volatility.

Upcoming Events

As the global markets digest the recent economic announcements, attention will turn to upcoming economic data. At 01:30 PM GMT, the U.S. will release its final GDP q/q for the third quarter of 2024, along with Unemployment Claims data.

The current economic climate remains uncertain as investors weigh the implications of slower economic growth, tightening global liquidity, and the potential for further rate cuts amid an increasingly complex macroeconomic backdrop. The next few days may provide further clues on how the markets will navigate this challenging period.

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